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Session 2006 - 07 Publications on the internet General Committee Debates Finance Bill |
Finance Bill |
The Committee consisted of the following Members:Alan
Sandall, Hannah Weston, Committee
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attended the Committee
Public Bill CommitteeThursday 10 May 2007(Morning)[Mr. Eric Illsley in the Chair]Finance Bill(Except clauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, schedules 1, 18, 22 and 23, and new clauses relating to microgeneration)Clause 5Rates
of duty on alcoholic
liquor
Question
proposed [8 May], That the clause stand part of the
Bill.
9
am
Question
again
proposed.
Mr.
Colin Breed (South-East Cornwall) (LD): I welcome you to
the Chair, Mr. Illsley, for our deliberations this morning.
We are discussing clause 5 on duty and tax on alcohol
sales.
Most people
would accept that if access to almost anything is increased and the
cost is reduced, consumption is likely to increase, although they would
not be certain by how much. Access to alcohol has increased in recent
years, as have licensing hours more recently, with availability in so
many different outlets. Therefore, if there is not a reasonable
increase in cost—for example, in line with
inflation—consumption will increase in the way that it has. That
has given rise to health and, more particularly, antisocial issues,
because alcohol certainly has some influence on antisocial behaviour
and perhaps on domestic violence and so
on.
It is important
and right that the Government maintain the cost of alcohol by
increasing the duty in line with inflation. There may even be a case
for increasing it beyond that, but I am happy with the proposal to
increase it in line with
inflation.
I want to
emphasise a point to the Government. There is a difference between
sales from licensed premises and from off-licence premises. On the
whole, and particularly more recently with the tightening up of some of
the licensing arrangements, licensees of public houses and so on have
been more responsible. They exercise more control and if they fall out
of line, they may have conditions placed on their licence or even lose
it. In fact, only last week or the week before, a licensee in my
constituency lost his licence because of problems inside and outside
the premises. That is a warning to
others.
I find in my
constituency, as other hon. Members may find in their constituencies,
that much of the antisocial behaviour and binge drinking on the
streets, particularly under-age drinking, usually emanate from
off-licence sales, which are far less protected by
legislation and more likely to provide people with alcohol when they
should not have it, either because they are already intoxicated or they
are under
age.
In
recent times, pubs have been hit with more legislation, higher energy
costs and so on, yet supermarkets have promotions that reduce the cost.
The differential between the two outlets in terms of access and cost
has become rather too wide. Have Treasury Ministers or the Government
studied the option of an aspect of variable duty? Perhaps they could
provide a different rate of duty for those sales made from off-licences
and those made from on-licences, which would recognise the issue about
the social aspects and availability. I believe that there is a
case for at least considering some sort of differential rate for
off-licence and on-licence sales of alcohol.
In passing, can I request an
explanation of the treatment of the spirits tax? I think that the hon.
Member for Wolverhampton, South-West referred to this earlier in our
deliberations on the clause. I am not certain why that tax has been
frozen for some time. It might well be a measure to protect the Scotch
whisky industry and, in my part of the world, Plymouth gin sales, but
that seems a little strange in terms of our promotion of free trade and
so on. It might mean that the tax on spirits was out of line, and so it
has been frozen to get it back into line. If that is the case, when do
we anticipate that spirits taxation will be back in line so that it can
start to increase again? However, the Financial Secretary might be able
to give us another explanation.
Mr.
Paul Goodman (Wycombe) (Con): The explanation given last
year was that spirits are taxed significantly more than beer, so let us
see whether the Financial Secretary gives the same explanation this
year.
Mr.
Breed:
That would fit in with the suggestion that I
made earlier about the tax being out of line. If that is the case, it
would be interesting to know when spirits will be back in line so that
taxes on spirits can be increased in line with those on other alcohol
sales.
Mr.
Philip Dunne (Ludlow) (Con): It is a great pleasure to see
you in the Chair today, Mr. Illsley. I want to raise two
issues about the clause. First, I want to echo some of the comments
from the hon. Member for
Plymouth—
There is a question about the
distinction between on-trade and off-trade in respect of the increased
duties for beer. It is particularly pertinent this year given the
substantial increase in costs that have been imposed on the on-licence
pub trade by the ban on smoking in public places. Publicans up and down
the country have had to invest significantly in their pubs to retain
their volume of business. The evidence from other countries that have
already imposed a smoking ban—Scotland, and Ireland last
year—is that there is a marked decline in trade in many pubs
that do not offer food. Consequently, pubs are not only having to
increase their costs but they are seeing their sales decline. To hit
them with another increase in duty at the same time seems unduly
harsh.
Mr.
Jim McGovern (Dundee, West) (Lab): The hon. Gentleman
mentions the decline in trade in some pubs in Scotland that do not sell
food. Does he agree that pubs in Scotland that sell food have seen a
marked increase in
trade?
Mr.
Dunne:
The hon. Gentleman is clearly a much greater expert
than I am on the state of the pub trade in Scotland. It would not
surprise me if pubs selling quality food did better. In my
constituency, we have a growing reputation—I believe the
Financial Secretary is aware of this—for the quality of food in
our pubs, which attracts tourists to the area. Providing that requires
a considerable investment to upgrade the kitchens and catering
arrangements. That costs publicans money, which is why there is a case
for considering a differential rate of duty for on-trade and off-trade
alcohol sales.
Mr.
Goodman:
The British Beer and Pub Association claims that
sales in Ireland fell by 7 per cent., so presumably that factors in
pubs that sold food and those that did not. It would be interesting if
the Financial Secretary could give us a total figure for Scotland, as
well as for—[Interruption.] No one has yet referred to
whether sales have risen or fallen in pubs in Wales, whether food is
served or not. I am sure that the Financial Secretary, who is nearly
always able to answer as many questions as we ask, will be able to
answer that, too.
Mr.
Dunne:
I am grateful for that intervention. Like my hon.
Friend, I should be interested to know what is happening in Wales. My
constituency is adjacent to Wales, so that issue is something on which
I could do some research for when we next discuss it.
Having looked through the Red
Book, I am confused about the impact of the proposed changes to alcohol
duty, so I should be grateful if the Financial Secretary could clear
that up for me. Table A1, on page 209, shows that the receipts to the
Revenue appear to have declined in real terms over the three years
identified, although in nominal terms they are of course rising
significantly. I assume that that is to do with the differential on
spirits not being increased in line with inflation. However, I should
be grateful if the Financial Secretary could confirm that, because the
inflation rate of 3.4 per cent. that has been used exceeds the
Government’s favoured measure of inflation, but is less than the
retail prices index measure of inflation. I should also appreciate it
if he would say which measure of inflation has been used to uprate
duty, and from what
time.
Adam
Afriyie (Windsor) (Con): Does my hon. Friend share my
concern that talking about a just-below-inflationary increase in duties
ignores the overall inflation of the price of those goods? If inflation
is 5 per cent. and the price of a good rises by that much, there will
also be the additional cost of the increase in the rate of duty, which
means that the rate
of inflation is in fact 7.5 per cent. The rate of increase in the duty
on a good therefore increases the rate of inflation on that good
overall.
Mr.
Dunne:
I am grateful to my hon. Friend. Undoubtedly, if
the price of a good and the duty on that good both rise, the overall
cost of that good will rise by significantly more than the rate of
inflation. Beer is currently a very marginal product, with
brewers’ profits a matter of just 1p or 2p a pint when the
Government are now taking substantially more than that, as we can tell
from the measure.
The
main issue that I want to cover, however, is duty on wine where the
differential, to which my hon. Friend the Member for Wycombe referred,
has been restored between still and sparkling wine. That contrasts with
the Government’s approach three years ago, when the duty on
sparkling wine was frozen. I should appreciate it if the Financial
Secretary could explain why the Government have made such a U-turn so
soon after deciding to freeze the duty on sparkling
wine.
There is a
marked distinction between the tax-raising approach that all
Governments in this country have taken towards wine and the approach
adopted by many of our partner countries in Europe, not least the wine
producers. As we move into an era of accelerating climate
change—as was evident last month—there is an increasing
interest in the production of wine in this country, which needs to be
taken seriously.
For
those hon. Members who are not familiar with the rates of duty in our
main competitor economies in Europe, I have taken the trouble of
looking them up. In France, for example, which as everybody knows is
one of the largest producers, the rate of duty per hectare litre is
€3.4. In Italy the rate is zero and in Germany it is zero, too.
To use euros as a comparator currency, the rate in the UK
is—wait for it—€253.97 per hectare litre. That is
a major barrier to the effective production of wine in this country,
compared with our competitor
countries.
9.15
am
I have done a
little research into what is happening in the wine production sector in
this country. I am pleased to tell the Committee that under the
previous Conservative Government wine production in the UK grew
markedly. In 1984, which is the earliest year for which I have figures,
there were 281 vineyards in the UK, with 430 hectares planted to wine.
By 1996, that had risen to 408 vineyards and 965 hectares, so the
hectares planted had roughly doubled. I very much regret to say that
under the Labour Government, the area planted to vines has declined
markedly. It was down to a mere 350 vineyards in 2005, with
only 793 hectares planted. I shall not attempt to draw a
direct parallel between the political complexion and the propensity for
vineyard operators to decide to plant vines, but the fact that duty has
risen so significantly on wine compared with other agricultural produce
may have had something to do with
it.
Rob
Marris (Wolverhampton, South-West) (Lab): I do not know
whether the hon. Gentleman has them, but I strongly suspect that if he
looks at the comparative figures for the major producers in France,
Italy and
Spain, he will find that the proportional decline in hectarage has been
far greater. It is because of the quality of wine going up and the
number of hectares under cultivation going
down.
Mr.
Dunne:
I readily accept that the biggest influence on wine
production around the world has been the advent of the new wine
producing regions outside Europe. The largest volume of wine imported
into this country comes from South Africa, rather than France. The
entry of South Africa, Australia, Chile and other markets and new
producers is having an impact on traditional European producers.
Proportionately this country is a tiny producer, but we are seeking to
grow.
I
have also looked at the yield of wine produced from our acreages and it
struck a chord that in 1996 the yield reached a record level of 33.7
litres per hectare. It declined in 1997 to a mere 8.2 litres per
hectare—the worst yield on record. While there was jubilation in
many parts of the country at the advent of a new Government, with corks
popping from many bottles of sparkling wine and champagne all over the
metropolitan areas of Millbank, there was a very significant reduction
in yield.
The point I
am trying to make is that interest in domestic wine production has
increased. I recently visited the Ludlow Food Centre in my constituency
which opened last month and counted five bottles of regional wine that
had been produced within a 30 mile radius of this emporium for local
food, which I commend to any visitors to the west midlands. There is
undoubtedly growing interest in this diversification in
agriculture.
Mr.
Breed:
If we are not careful we will all get in plugs for
own areas. There has been a substantial increase in wine growing in
Cornwall, partly because of the weather. We would all like to see that
increased. Does the hon. Gentleman suggest that, like the Scotch whisky
industry, which has perhaps had some preferential treatment, British
winegrowers should be given some assistance to help to promote British
wine, with the creation a variable duty for British-produced
wine?
Mr.
Dunne:
The hon. Gentleman pre-empts precisely what I was
going to suggest. I know there are difficulties in distinguishing
between country of origin, and under the state aid rules it would be a
bit challenging to devise a form of duty that is geographically based.
I think that Scotch whisky is separate from wine because it is treated
in precisely the same way as other spirits. I do not believe that there
is a differential rate of taxation for Scotch as opposed to gin or
vodka, whether produced in this country or elsewhere. There are,
however, special rules for cider, which is primarily because this
country was one of the very few countries in the world that produced
alcoholic apple juice in the form of cider.
I am sure that it is not beyond
the wit of the Treasury to devise a scheme that would allow a
preferential rate for domestic production. I urge the Minister to give
consideration to that ahead of next year’s
Budget.
James
Duddridge (Rochford and Southend, East) (Con): I welcome
you to the Chair, Mr. Illsley. This is my first contribution
to this, or indeed any, Finance Bill. I have spoken to a number of
colleagues for advice, and I understand that so long as I pepper my
speech with constant references to Mrs. Duddridge I will not
go too far wrong. I thank my hon. Friend the Member for South-West
Hertfordshire for that advice.
I do not know whether I need to
declare an interest as a member of the Campaign for Real Ale. Indeed, I
judged the real ale competition this year. I do not wish to use my
membership of that organisation or, indeed, of the all-party beer group
to lobby for that interest, but I do want to raise some more general
points. The Budget has always been an exciting point in the political
calendar, and the duty levied on booze and fags—or perhaps I
should say alcohol and cigarettes—has always produced headlines.
I rather suspect that the Government enjoy the fact that the headlines
about cigarettes and alcohol put them, rather than a more substantive
analysis of the detail of the Budget, high on people’s
lists.
However, it is
unhelpful to the drinks industry to change taxation at such short
notice and so frequently. I would be interested to find out whether the
Treasury has any plans to regularise the situation and put in a bit of
long-term planning. Then we could say to the drinks industry that we
would, for example, look at alcohol duty rates over the next three
years. I note that in three of the past 10 years there were no
increases in duty. That might have made business planning difficult.
Perhaps the Treasury could introduce proposals to produce a little more
consistency.
I note
that it has been suggested in previous debates that tax codes might be
getting a little too long. What consideration has the Treasury given to
simplifying the taxation of alcohol? Rather than being complicated by
spirits, wine and beer, it should take account of the amount of
alcohol. I know that the Minister has said that this is not a health
measure but a revenue measure, but it is the amount of absolute alcohol
that does the damage rather than just the consumption of
volume.
I should also
be interested in the Minister’s comments on beer and
micro-breweries. I have a good micro-brewery, Blanchfields, in my
constituency, which was very supportive during the general election by
putting out the “Tory Tipple”, of which much was
consumed. Such breweries, rather like home-grown wine producers, need a
particular level of support. It concerns us all that on every high
street we see the same shops, pubs and other retailers. It is a great
disappointment that the Cork and Cheese in my constituency, which is
typical of a number real-ale pubs around the country, is closing down
due to a number of pressures, taxation on alcohol being one of them and
the smoking ban another. In that case, there were some local issues as
well.
On the duty
on spirits, I have always been confused by the fact that spirits and
beer are treated differently. Earlier contributions mentioned bringing
them in line rather than taxing them differently. Again, it would make
a lot of sense to have a consistent plan for the treatment of alcohol
that did not distinguish between different groups. I recognise that we
are, for example, great producers of cider. However, as the hon. Member
for Falmouth and Camborne mentioned in a previous debate, we treat
strong beers differently, but there are
also strong ciders. Having spoken to a number of constituents with
mental health problems, I know that some of them use the phrase
“self-medication” to describe simply knocking oneself out
with the strongest beer or cider possible, so I think that there is a
case for considering strong beers and strong ciders
together.
Rob
Marris:
The hon. Gentleman talks about simplifying the
rates of duty on alcohol, but does he think that the micro-brewery in
his constituency would welcome such a simplification, which would get
rid of the tax break that the Labour Government gave to encourage
micro-breweries? Does he think that beer producers, such as
Marston’s in my constituency, which is one of the
country’s major producers, would welcome a narrowing of the
differentials between beer and wine, which would thereby put
beer-producing jobs in this country at risk to the benefit of
wine-producing jobs, principally
abroad?
James
Duddridge:
There will be always be special pleading of
cases. As a beer drinker, I appreciate the hon. Gentleman’s
point, but it is important to simplify the legislation for the longer
term. There are great inconsistencies in treating different types of
alcohol differently.
On the consumption of alcohol
from off-licences, clubs and pubs, the main problem in my constituency,
unlike those of other hon. Members who have spoken, is not with alcohol
sold in off-licences, but with cheap alcohol sold in pubs and clubs.
One of the biggest social problems in Southend is that people come from
London and all around to drink in the town and then get caught up in
events that lead to crime and social disorder. I urge the Treasury to
consider introducing measures that would approach the taxation of
alcohol as a whole and not simply as a revenue
measure.
“I have
taken more out of alcohol than alcohol has taken out of
me.”
I
wonder whether that attitude is reflected in the slightly less
well-esteemed Treasury, given the amount of revenue that it raises from
alcoholic beverages. The Government seem to be committed to continually
increasing the duties on beer, cider and wine broadly in line with
inflation, although the rises have been slightly below the inflation
rate in the past 10 years. The duties levelled on spirits, on the other
hand, seem to be trailing inflation enormously. Why is that? What is so
special about spirits? Is it their alcoholic content compared with
those of beer, wine and cider, or is it about how they are used
socially? What is fundamentally different? What social research studies
underpin that clear policy of the past decade?
When I asked whether the
increases in duty were driven by economics or social policy
considerations, the Minister said that they were driven by revenue
considerations. Clearly those considerations are not mutually
exclusive, because raising the duties on alcoholic beverages will have
an impact on their consumption. Of course, the rate of duty, VAT or any
other tax on a good will affect its consumption. He seemed to imply,
although I am not sure whether this is
what he meant, that the changes in duties would not affect
people’s behaviour and that the social policies and social
outcomes that we seek should be effected through other
means.
I have a degree
in economics and I have been in business for about 20 years, and it is
clear to me that if you change the price of a good or service, the
demand for it and people’s behaviour towards it changes.
[Interruption.] I am happy to take an intervention if anyone
wishes to intervene. All the evidence and economics say that there is a
direct impact on people’s behaviour in relation to
alcohol.
Mr.
Goodman:
I am sure that the Financial Secretary will
correct me if I am wrong, but I recall that in the debate on tobacco in
last year’s Finance Bill, he mentioned the health considerations
explicitly near to the beginning of his remarks. It is clear that the
Government do not apply to alcohol the considerations that they apply
to tobacco.
Adam
Afriyie:
I welcome that intervention, because that was my
reading of the situation. I was concerned about the inconsistency. I am
quite sure that the provision could not possibly be before us for the
sake of expedience during this debate, but I should welcome
clarification of the Treasury’s position on the social versus
revenue-raising outcomes of such
policies.
9.30
am
I accept the
argument that a small change in price will have only a marginal impact
on a marginal group of people. However, it is undeniable that there
will be an impact. I should welcome clarification about that point when
the Financial Secretary has reflected on it.
The tax system is used to
change behaviours in many different areas of our lives. If one visits
any magistrates court, it becomes abundantly clear that alcohol fuels a
great deal of antisocial behaviour—there is no doubt about
that—and violent crime. When we consider the rate of duty on,
and our fiscal treatment of, alcohol, above many other products and
services in society, the social consequences must be uppermost in our
minds.
If alcohol
were placed on the scale of harm by the Advisory Council on the Misuse
of Drugs, it would rate highly. In terms of the harm that it does to
the individual and to society, it would rate more highly than many
other illicit drugs that we consider to be completely unacceptable. I
am not arguing that we should ban alcohol; I simply seek to probe the
thinking behind the consistent link of duties to inflation, with
various rates on various products, because it would be quite easy to
stagger on doing the same thing. The Bill is an opportunity to probe
the Government’s thinking and to consider what outcomes we
seek—other than tax-raising outcomes.
Given the
harm, misery and upset that alcohol often causes, I must ask some
specific questions about the Financial Secretary’s consideration
of the social consequences of the Government’s duty regime. What
studies has his Department or the Department of Health undertaken into
the impact of fiscal measures on the behaviour of alcohol consumers?
What discussions has he had with the Home Office, the Department of
Health and the Advisory Council on the Misuse of Drugs
about the clause? I am sure that he has considered
the matter very carefully, but if he had not had any discussions with
any such groups about the continual inflation-linked rise in duties, it
would not be a particularly helpful way to proceed when we are
concerned about the harm that the misuse of alcohol does to
society.
There is an
inconsistent approach. On the one hand, the Government appear to be
liberalising alcohol use with their licensing measures and their vision
of Britain as a more continental user of alcohol. There is a lot more
drinking of wine in the afternoon sunshine
nowadays—
On the other hand, however, the
Government hand out antisocial behaviour orders and spend hundreds of
millions of pounds on dealing with the social consequences. There must
be consistency between the policy outcome of the clause before us and
the other measures. I am sure that there must be, but I should welcome
an explanation of how it makes sense.
Stephen
Hesford (Wirral, West) (Lab): Is the hon.
Gentleman’s experience the same as mine? The number of people
using the accident and emergency unit in my constituency on Friday and
Saturday nights has gone down since the
liberalisation.
Adam
Afriyie:
I welcome that intervention. I am delighted that
the hon. Gentleman has an A and E unit in his constituency and that the
social outcomes of the licensing changes in his area appear to be
moderately positive. That is not my experience in my area, however; nor
does it appear to be the experience in many other areas around the
country.
There must be
a connection between the duty on, and the price of, alcohol and the
level of alcohol usage. The hon. Gentleman is considering the social
outcome and the health outcome in terms of visits to A and E, normally
in the early hours of the morning. I am probing to find out the
direction that the Government are taking and the philosophy behind it.
What is the link between the different issues? Does the
Government’s policy in this area make sense? Is it consistent?
If the Financial Secretary persists—I feel sure that he will
not—with the assertion that fiscal changes to duty do not have
an impact on consumption, that will sadden me to some degree, not only
because it does not make sense in the real world, but because it means
that all the other Government policies to change behaviour must be
faulty.
We have heard
that air passenger duty is supposed to reduce the number of flights,
for example. It is a revenue-raising measure, a bit like the duty on
alcohol, but the Government have suggested that it will reduce the
number of flights and so reduce carbon emissions by several million
tonnes, although I do not remember the exact figure. The level of duty
clearly has an impact on behaviour in that area, or at least the
Government suggest that it does. Would the Financial Secretary argue
that higher vehicle excise duty for vehicles with higher carbon
emissions has no impact on behaviour? I do not believe so. We have only
10 or 12 low-carbon homes at the moment, if any at
all—
Adam
Afriyie:
We have none? My goodness. [Interruption.]
Is it 12? We do not know. I thank my hon. Friend for his
intervention. We are told that taxation will be reduced to encourage
the building of low-carbon
homes.
Adam
Afriyie:
I seek merely to draw the parallel with other
areas of Government policy, where there is clear understanding that the
level of taxation and the price of goods and services affect
consumption and therefore affect social and policy outcomes. There
seems to be a deep inconsistency.
I give the Government credit
for being a modernising Government in many
respects.
Adam
Afriyie:
For using the language of modernisation. When I
was reading through the Bill and the accompanying notes, however, I
noticed references to hectolitres. Perhaps the Financial Secretary will
explain why we continue to use that term. Why do not we use litres or
some other standard unit of measurement? Why do we not take the
opportunity to do so today, rather than stick with a marginally
old-fashioned measure? There may be good reasons; I simply make the
observation.
In
another area of society, motorists are asked to pay money towards
victims of crime who have nothing to do with the motoring offence. Has
the Financial Secretary given any consideration to some form of
hypothecation? I am not proposing it, but has he considered direct
hypothecation from the duties raised on alcohol to health care and
crime reduction?
It
seems that the Government are blindly staggering on with the same
regime in this Bill. I look forward to hearing the Financial
Secretary’s comments on the issues that I have raised. I am
particularly interested in the consistency, if there is any, between
the duty regime on alcoholic beverages and the other Government
policies that seek to change behaviour by changing taxation on the
goods and services that we consider good or
bad.
The
Financial Secretary to the Treasury (John Healey):
I
welcome you to the Chair, Mr. Illsley, for the first time on
a Finance Bill; I am delighted to see you. I do not know if that counts
as a promotion or a penalty, in terms of the Speaker’s Panel of
Chairmen.
John
Healey:
We will do our best as a Committee to behave and
make your job as easy as possible, Mr. Illsley.
By tradition, this Committee
tends to take a particularly close interest in, and have particularly
long debates on, the clauses in the Finance Bill that are related to
alcohol. Today is no exception.
Perhaps I could start by
welcoming the newcomer to the Committee, the hon. Member for Rochford
and Southend, East. [Hon. Members: “Where
is he?”] I am sorry that he has not been able to stay longer
with us. He took his files and departed a little earlier. I also
welcome his membership of the Campaign for Real Ale; I must say that
that is a very fine organisation, championing a very fine
cause.
The hon.
Gentleman asked me about the simplification of the alcohol legislative
and taxation regime. He is new to the Committee, so he probably did not
see that in the 2006 Budget we announced more than 30 simplification
measures for the alcohol regime. In Budget 2007, we announced that
there would be more discussions with the industry about further,
longer-term reforms and simplifications that we can introduce into
what, after all, is an excise regime that is centuries old and ripe for
the sort of fairly radical reform that we are
undertaking.
Mr.
Newmark:
I can only assume that, as with all things
connected with this Government, while they give with one
hand—that is by perhaps reducing the number of
taxations—they take with the other, which probably explains why
Tolley’s tax guide has increased from roughly 3,900 pages to
10,200 pages.
John
Healey:
May I suggest that the hon. Gentleman consults the
alcohol industry’s representative groups? If he does, he will
see how welcome they find the moves that we are taking and they will
tell him how involved they are in these measures. That may be something
that he wishes to pursue after this Committee hearing.
May I also welcome the hon.
Member for Windsor and his contribution, which rounded off the debate?
I must say that he made what seemed to me an extraordinary point, by
suggesting that somehow we should not be using tax to raise revenues
for the public purse. That is a quite extraordinary proposition, and
frankly it was implicit in his whole line of
argument.
Adam
Afriyie:
I consider that comment to be rather unfair. I
made it clear all the way along that the implication was that fiscal
changes have a direct impact on behaviour, and I was calling on him to
explain why he was suggesting that these measures would not have an
impact on behaviour.
John
Healey:
Let me try to be a little fairer in the second
point that I wanted to make about the hon. Gentleman’s
contribution to the debate. He told the Committee that he is an
economics graduate and also that he had spent 20 years in business. I
find it extraordinary, therefore, that he has not come across the
concept of demand elasticity in that time. Clearly that concept applies
differently to beer, fags, cars and homes. Quite honestly, that is the
simple answer to the question that he was
raising.
Adam
Afriyie:
I have a thorough understanding of
economics, and by simply mentioning the word elasticity the Financial
Secretary has acknowledged that there is an elasticity of supply and
demand for every good or service. So he has made my point for me, and I
thank him for doing so.
John
Healey:
The demand for some things is relatively
inelastic, as in the case of beer, so a rise in price does not
necessarily affect demand directly or substantially; that is the nature
of the concept of
elasticity.
If the
hon. Gentleman has a degree in economics, he probably knows the answer
to one of the questions that he asked me, which was about hectolitres;
a hectolitre is 100 litres. The reason that we continue to use
hectolitres is that they are the measure set out in the European
legislation that we have to implement and reflect in this country. I am
afraid that there is no way around that.
The hon. Gentleman also asked
me about the discussions that we had with the Department of Health and
the Home Office in the run-up to the Budget. Of course, we have regular
and detailed discussions with both Departments, and other Departments,
in preparing the Budget. I must tell him, and the Committee, that I
have the privilege, as the Treasury Minister responsible, to sit on the
ministerial alcohol group. One of the main things with which that group
has been concerned in recent months is the preparation for the summer
launch of a renewed alcohol harm reduction strategy, which will draw on
the capacity, the concerns and the contribution that all Government
Departments might make to tackling that
problem.
9.45
am
I am glad that
the hon. Member for South-East Cornwall is happy with our proposals for
a duty increase in line with inflation, as in clause 5. He is right
about the increasing difference between on and off-trade sales, which
members of the Committee would acknowledge principally reflects the
changing patterns of consumption and leisure time. I must tell him and
the hon. Member for Ludlow, who raised the same point, that it would
not be legal for us to consider a duty differential for sales that
depend on the location of off and on-trade. I have considered it, but
that is the legal position; it is simply not possible.
I turn now to the series of
comments that were made by the hon. Member for Wycombe, speaking from
the Conservative Front Bench on Tuesday at Question Time. He started by
observing rightly that alcohol duty changes in this Bill are contained
in one clause. He asked why, as in last year’s Finance Bill it
was two clauses. I must be honest: it is simply a reflection of the
preference of parliamentary counsel. [Interruption.] My hon.
Friend the Member for Wolverhampton, South-West murmurs and grunts, but
he will appreciate the point that even parliamentary counsel, unlikely
as this may seem to some, have a personal drafting style. It is that
style that has given us such great assistance with this Finance Bill,
and is reflected in the fact that we have one clause rather than
two.
The hon. Member
for Wycombe spent some time painting what I thought was a negative
picture of the brewing industry in Britain. It is certainly the case
that there is a long-term decline in overall beer sales. However,
within that market in Britain now, we have vibrancy, innovation, and an
increasing range of choice in beers, driven not least by an increasing
number of local micro-breweries. The small breweries relief has been an
important part of being able to encourage such growth and diversity. I
know that the Campaign for
Real Ale welcomes that. Small breweries often bring a boost to local
economies, many of them in rural areas. They provide valuable
employment in those areas, and we calculate that more than 130 new
breweries have opened since we introduced the small breweries relief,
creating more than 1,000 jobs in the industry.
I am not sure that I like the
sound of the Tory tipple of the hon. Member for Rochford and Southend,
East. However, I could recommend Wentworth pale ale, which is a product
of the Wentworth brewery in my constituency. It is a small brewery that
has benefited significantly from the small breweries relief. In fact,
Steven Beech, the managing director of Wentworth brewery, recently said
to me about the small breweries
relief:
“This
is undoubtedly as far as Wentworth Brewery is concerned a major and
very positive step... The brewery has reaped the benefits in an
increase in turnover and a corresponding increase to our
workforce.”
He went on
to confirm that turnover has increased by 50 per cent., and the work
force have also increased by over a half. That is direct proof, he
said, of the effectiveness of the small breweries relief. I suspect
that a number of other members of the Committee have similar breweries
in their constituencies.
I turn now to another source of
concern that the hon. Member for Wycombe and other members of the
Committee raised: the smoking ban in England from the beginning of
July. It is interesting to note that just five days after the Budget,
Greene King, one of this country’s significant and good brewers,
was upbeat about the results of an independent survey that it reported,
because they pointed to the opportunities that many brewers and
pub-chain owners see in the smoking ban. The survey showed that one in
three young couples with families who avoided pubs would consider
buying family meals following the ban and that more women aged 45 to 54
were likely to visit following it.
Although it is early days, even
in Ireland, certainly in Scotland and even more so in Wales, the
experience suggests that the impact will vary from pub to pub and that,
on balance, the status quo is likely to be preserved in the longer
term. It is clear that pubs that do not prepare for the ban are likely
to lose out.
Ian
Lucas (Wrexham) (Lab): Picking up on that point, it is
very much the case that in my constituency and Wales more widely the
smoking ban that was introduced at the beginning of April has been
warmly welcomed. A number of pubs pre-empted the ban themselves. I know
that one pub introduced a ban in December and commercially has thrived
as a consequence.
John
Healey:
My hon. Friend’s experience in Wrexham is
interesting and not atypical of the reports that I receive from hon.
Members who represent constituencies in Scotland and Wales. He is right
to say that the pubs that prepare can benefit rather than lose out from
the ban—the experience is clear to that extent. On balance,
landlords are positive about the prospect of the smoking ban. It will
also help some of them, as well as some of their customers, to give up
smoking.
Finally, the hon. Member for
Wycombe made comments and raised questions on the state of the
industry.
Mr.
Goodman:
The Financial Secretary has quoted at least one
survey on the effect of the smoking ban, but the British Beer and Pub
Association has claimed that sales fell by 7 per cent. in Ireland. Has
the Treasury studied the effect of the ban in Ireland? Can he confirm
the figure that I have given?
John
Healey:
I can confirm two things. First, I am aware of the
representations and points made by the BBPA, which I saw before the
Budget, as I do every year. Rob Haywood is a good chief executive of
that association and represents the industry effectively. Secondly, we
carefully study such evidence as it emerges from Ireland, Scotland and
Wales. On balance, across the board the conclusion that we and others
are drawing is that in the longer term the ban does not appear to be
having a serious effect on the pub industry.
The hon. Gentleman also
mentioned higher energy and raw material costs, which was a point put
to me by the BBPA, and one that I also made in my opening remarks on
the clause. He recognised in the end the balanced decisions that we
must take in government, and I hope that he will take that stance when
we come to decide whether to allow the clause to stand part of the
Bill. We have tried to recognise the industry’s concerns, but at
the same time we are trying to maintain the value of an important
revenue stream to the public purse. That is essential to help us to
support our investment in public services.
A number of hon. Members raised
the question of using tax somehow to price and regulate the consumption
of alcohol. They are right to say that it has been a long-standing
element of the policy approach to the taxation of tobacco; that is true
of the past 10 years of Government and was certainly true of the last
10 to 20 years of the previous Government. Doubtless, we shall come on
to consider some of those questions in discussing the next
clause.
I made the
point to the hon. Member for Windsor that each case is different. It is
clearly right that we examine the evidence, and the case has not yet
been made that tax would be an effective way to reduce the social
problems that come from the abuse of alcohol by a small, but
nevertheless visible, minority. The Government remain of the view that
social legislation and regulation, and active encouragement of pressure
on the trade through self-regulation are better ways to tackle our
concerns in our constituencies and nationally about the harm—the
social problems and health difficulties—caused by the abuse of
alcohol.
Adam
Afriyie:
Considering the scale of harm done to
society by antisocial behaviour resulting from alcohol abuse, can the
Minister run off a quick list of studies that the Treasury or the
Department of Health have commissioned on the elasticity of the demand
and supply of alcoholic
beverages?
John
Healey:
I will do better than that. I will send the hon.
Gentleman a copy of the publication in which we
set out our modelling and our assessment of these issues, as we have
done every year.
I am
disappointed that at the end of the debate I am still not clear whether
it is the policy of the hon. Member for Wycombe to raise taxes on beer
and wine to take the price of those drinks out of people’s
reach. Perhaps we will have to wait a little longer to find out. He
would certainly have the support of some of his hon. Friends on the
Back Benches, and of his wider party, for such a policy. It is the
implication of this morning’s contributions and it is something
that we will return
to.
I
return to the balance of taxation between different types of drinks.
Hon. Members were right to point out that we have frozen the duty on
spirits in 10 successive Budgets, and I am proud of that. Spirits are
still taxed more heavily than any other form of alcoholic
drink; 10 years ago, they were very much more heavily taxed.
As I have explained to successive Finance Bill Committees, we have been
consistent in that policy. Our judgment in respect of excise duty on
alcohol is that there should be a fairer balance of taxation between
the different alcoholic drinks—I repeat, a fairer balance, not
an equalisation of the rates; the two are fundamentally
different.
It is not
our ultimate policy aim to equalise the taxation on different types of
alcohol and drinks. The reason is self-evident: if it was the sole and
principal aim of taxation policy decisions, which was rigidly adhered
to, there would be little or no scope for taking into account other
factors or pressures that may be relevant to a particular
industry.
For
example, in the last four Budgets, we have been able to freeze the duty
on cider; in fact, we cut it in recent years, irrespective of the
decision that we took on other alcoholic drinks, because the cider
industry in Britain was seriously struggling and the industry is very
important in supporting farmers in local areas and the rural economies.
We could take that decision because of the economic circumstances in
that industry, which were different from those relating to spirits,
beer or wine. We need the scope to take broader and different
dimensions into account when taking those
decisions.
Mr.
Breed:
That decision was welcomed, and in a broader sense
it was especially helpful to the agriculture industry, even in
Cornwall, which is not a cider area, but sends its apples elsewhere.
Cider is not only produced in Somerset and Herefordshire. Although the
Minister may not imbibe the Tory tipple, he might well sample a very
good cider called Thatchers Ruin if he was in
Somerset.
John
Healey:
I have a lot of time for Mr. Thatcher,
who has been a leading figure in the National Association of Cider
Makers, and I have enjoyed my contact with him and his firm, although
not his product, in recent years.
It is true that our decision
substantially helped the cider industry. Clearances of cider in 2005-06
rose by 15 per cent., and all the market research and projections
predict further growth in the industry for this coming year. It was in
those circumstances that we took the decision this year not to freeze
duty on cider but to raise it in line with inflation, as we are doing
with beer and
wine.
10
am
I was asked by
the hon. Members for Ludlow and for Wycombe about duty on sparkling
wine. They may be aware that the duty on sparkling wine has been frozen
in the past six budgets. The level of duty has therefore fallen in real
terms by a full 16 per cent. since 1997—in anybody’s
book, a supportive tax treatment of sparkling wine over the
years—and, over the past decade, sales of sparkling wine have
nearly doubled. We took all those factors into account when making
decisions for the Budget and the
Bill.
I
want to deal with the points that have been raised by the Committee. I
hope that Members will indulge me a little further as I deal with two
or three matters that the hon. Member for Ludlow raised but that I have
not yet touched on. He asked about the figures in the Red Book. The
projections of changes in alcohol receipts as a result of the Budget
decisions announced in March, and the small reduction, take account of
the decision to freeze spirits duty in the Budget. The measure of
inflation that we use for those and other projections in the Red Book
is well established. It is the quarter three retail prices index
forecast for the year
ahead.
The
hon. Gentleman then dealt in some detail with the wine industry. In
particular, he wanted to know whether some sort of preferential
treatment for UK-produced wine might be possible. There are several
points to bear in mind. First, all wine sold in the UK, whatever its
country of origin, is taxed at the same rate. Secondly, the output of
the UK wine industry, which is extremely good and increasingly well
regarded worldwide, still represents only about 1 per cent. of wine
consumption in the UK. According to the analysis of the Department for
Environment, Food and Rural Affairs, it is regarded as a high-quality
product—that is increasingly true of UK sparkling
wines—but the tax treatment is entirely consistent across the
board for products sold in this county, whatever their country of
origin.
The
hon. Gentleman then asked whether there could be a special taxation
regime to favour UK-produced wine. Unfortunately—from his point
of view—were we to introduce such a regime in Britain, it would
constitute an illegal state aid. We would be legally prevented from
doing that, so we cannot consider or pursue such a policy
option.
I hope that I
have dealt with the comments and concerns of members of the Committee,
and that the indications that we have had during the debate mean that
both sides of the Committee will be content to let the clause stand
part of the
Bill.
Question put
and agreed to.
Clause 5 ordered to stand
part of the Bill.
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